Understanding Your Numbers

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Often when working with our clients we find that businesses experience common problems. We believe that through implementing key performance indicator (KPI) tracking, business owners can identify these problem areas, and deal with any issues efficiently and effectively.

To illustrate, the following is an example of a retail store that sells televisions, music systems, phones, computers, games and consoles and other consumer electronics, and after completing the year end accounts the following three problem trends were identified:

  1. Sales had declined year on year
  2. Gross profit percentage was falling
  3. The business was running out of cash.

The two KPI’s that were showing negative trends were average value of sales, and sales conversion rates. Average value of sales is tracked through the number of transactions per day by the total daily sales, which will give us an average transaction value. Sales conversion rates by store should be tracked by the number of people entering a store by the number of daily sales (this can be done by store as well as by sales assistant through cash register codes).

Once the information is gathered for these KPI’s, we can identify trends that could be causing the above problems. What was identified was that some stores and sales assistants had significantly better records for conversion rates, which resulted in higher average value of sales for these transactions.

This data should then be used to implement focused change within the business, such as ensuring the best sales team are working on peak days, or even soft-skill training to help increase the conversion rate for those stores and sales assistants that were not tracking as well.

Once a change is implemented, it should always be monitored to ensure you are achieving what you set out to. Remember nothing in business should be static, and you should always look for continuous ways to improve.

If you suspect you are having similar issues in your business, contact us to discuss how we can help you understand your numbers.